Jury is Out on Possible Effects of CVS/Aetna Merger

Could result in fewer choices for Aetna enrollees, observers say

If the proposed $69-billion purchase of health insurer Aetna by CVS -- a pharmacy chain that is also a pharmacy benefit manager (PBM) -- is approved, it may be good news for the companies involved, but its potential effects on patients and providers are not so clear, experts say.

For one thing, it might mean less drug price transparency for patients, said Tom Borzilleri, CEO of InteliSys Health, a firm that makes software to make drug prices easier to compare. "The majority of profit that PBMs generate is off the ingredient spread -- the difference between your acquisition cost versus what they charge the carrier they're managing the benefit for," said Borzilleri, who spoke during a phone interview at which a public relations person was present. If Aetna patients currently have, say, a $20 copay for their generic prescriptions, "Are they going to maintain the status quo ... and continue to charge the patient $20, when they could sell that drug and still make a profit at $8? These are all still the unknowns."

In announcing the acquisition deal on Sunday, CVS Health president and CEO Larry J. Merlo said, "This combination brings together the expertise of two great companies to remake the consumer healthcare experience."

"CVS Pharmacy locations will include space for wellness, clinical and pharmacy services, vision, hearing, nutrition, beauty, and medical equipment, in addition to the products and services our customers currently enjoy," he continued. "An entirely new health services offering available in many locations will function as a community-based health hub" for patients. He noted that CVS's offerings include more than 9,700 CVS Pharmacy locations and 1,100 MinuteClinic walk-in clinics as well as infusion services and more than 4,000 nurses who provide in-clinic and home-based care.

But that could mean fewer choices for Aetna enrollees, some say. "Already, patients are being steered into many pharmacies that are not necessarily the pharmacies of their choice," said B. Douglas Hoey, CEO of the National Community Pharmacists Association, which represents independent pharmacies. "This vertical integration will further accelerate the steering of patients into pharmacies and providers that are not of their choosing."

He added, however, that "CVS is a smart company; we have respect for their ingenuity. They're seeing writing on the wall when it comes to the current PBM model, and saying, 'We're looking at our customers starting to develop their own PBMs because they're tired of paying more.' CVS is making a proactive move to buy one of their customers; that's a reasonable business move to make."

Providers also might be negatively impacted if this purchase goes through, said Borzilleri, who also founded Valore' Rx, a PBM. "This is a move that is going to generate efficiencies within Aetna, but also is going to ultimately financially impact physicians and healthcare providers by rerouting those patients out of the doctor's office and into the clinics that are set up within CVS."

"To be able to herd those patients into CVS brick-and-mortar locations will reduce the number of patients that actual physicians are going to be seeing within their population, so it's going have a true benefit for Aetna as a carrier," he added. "It will provide some conveniences to the patient to be able to walk into a clinic versus going to their own doctor, but then again, patients are going to be influenced by Aetna to utilize those types of outlets."

There is also a possible conflict of interest that providers might face under this new arrangement, said Alieta Eck, MD, past president of the Association of American Physicians and Surgeons, a group that promotes the private practice of medicine, in an email. "When I was in pharmacy school before I went to medical school, there was a ruling that physicians could not have a financial interest in a pharmacy. The thinking was that there would be a conflict of interest, with physicians being incentivized to order prescriptions that helped the pharmacy earn a higher profit. At least in that case, the patients would not be harmed by using the more expensive medicines."

"The same reasoning could be used when an insurance company owns a pharmacy," she continued. "Hiring mid-level nurse practitioners run clinics within the CVS pharmacies could result in their prescribing medicines that yielded a higher profit for the insurance company, which can only be realized by giving lower cost care. Fewer tests would also lower costs."

But not everyone thought that the deal was a bad idea. "Potentially turning existing CVS pharmacies into community-based care sites that offer one-stop shopping for healthcare needs could be a significant positive disruption to the healthcare system," Joel White, president of the Council for Affordable Health Coverage (CAHC), an organization representing life science companies, PBMs, employers, agents, and physician organizations, said in a statement. "CAHC will continue to follow details of the merger, but we expect better and smarter access to the health system with greater efficiency and lower costs. At the end of the day, we believe this is a win for consumers."

CVS's news coverage has not always been positive. An investigation by the Chicago Tribune last December found that the pharmacy chain had the highest rate of failing to spot potential drug-drug interactions, at 63%, compared with other pharmacies. "CVS, which filled about 1 billion prescriptions last year, said the company would improve policies and its computer system to 'dramatically' increase warnings to patients," the paper noted.

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